The university received $1.9 million from this year's $278 million Ministry of Business, Innovation and Employment (MBIE) round, an 85.6% drop on the $13.2 million it received last year.
This placed it well behind the University of Auckland, which received more than $17 million, and also Waikato and Massey universities.
Most of the funding this year went to organisations outside the university sector, including AgResearch, Plant and Food Research and the Cawthron Institute.
Otago University deputy vice-chancellor of research and enterprise Prof Richard Blaikie said it was disappointing only two of its projects received funding despite ''a number'' being very well rated by the referees.
''What we gained in new contracts next year more than compensates for what MBIE contracts we have coming off. It's net positive, but not as good a result as we would have hoped for.''
Receiving funding were a project called ''manufacturing molecules through enzyme engineering'' ($1 million over two years) and one called ''selective insecticides'' ($920,000 over two years).
Dr Monica Gerth and Dr Wayne Patrick hope to develop new biomanufacturing processes for two chemicals - one used in paints, varnishes and adhesives and the other used to make synthetic rubbers - which were at present produced from petroleum.
Associate Prof Peter Dearden hoped to develop an insecticide effective against pests but which had no effect on bees.
Science and Innovation Minister Steven Joyce announced the 51 funded research programmes yesterday.
